Joshua Jarrett, a cryptocurrency investor, is in a legal dispute with the IRS over whether staking rewards should be taxed as income.
Jarrett, who got a refund on taxes for staking rewards, claims these tokens should be seen as new property instead of immediate income, opposing the IRS in a new lawsuit. This case could greatly affect U.S. crypto investors, especially with increasing regulatory attention.
Jarrett is asking for a refund of $3,293 for taxes on 8,876 Tezos tokens he earned by staking. His previous lawsuit in 2022 led to a refund, but it was dismissed without setting a legal precedent since the government gave the refund before the case was fully discussed in court.
The IRS has updated its position on staking rewards with Revenue Ruling 2023-14. This ruling states that these rewards must be included in a taxpayer’s gross income when received, no matter what happens after that. This ruling goes against Jarrett’s claim that staking creates new property, which shouldn’t be taxed until it’s sold.
The IRS says that staking rewards should be taxed based on their market value when you get them. This is part of their effort to keep a closer eye on cryptocurrency transactions. New reporting forms will be introduced, blockchain specialists will be hired, and AI tools will be used to fight tax evasion.
We don’t know how this legal fight will end, but it could have big effects. A decision for Jarrett could be a big win for crypto investors, possibly changing how staking rewards are taxed nationwide.
If the IRS wins, it would confirm its power to tax these rewards as immediate income, affecting many U.S. investors involved in staking. As both sides get ready for court, the crypto community is closely watching what happens, knowing that the decision could influence future rules.
